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What is Derivatives?
Literal meaning of derivative is that something which is derived.
Simple one line it is that value/price which is derived from any
underlying asset.
The term ‘derivative’ indicates that it has no independent value,
i.e., its value is entirely derived from the value of the underlying
asset.
The underlying asset can be securities, commodities, bullion,
currency, livestock or anything else.
The Securities Contracts (Regulation) Act 1956 defines
‘derivative’ as under, ‘Derivative’ includes Security derived
from a debt instrument, share, loan whether secured or
unsecured, risk instrument or contract for differences or any other
form of security.